What is the eligible service period?

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The eligible service period is the period during which the thing is to be done under the agreement in return for the expenditure. The eligible service period begins on the day the thing under the agreement commences to be done or on the day the expenditure is incurred, whichever is later. The eligible service period continues until the end of the last day the thing under the agreement ceases to be done or 10 years, whichever is earlier.

Example

Eligible service period

Mike runs a delicatessen from leased premises. On 1 December 2001, Mike made a lease payment to cover the period 1 December 2001 to 30 November 2002. The eligible service period for this expenditure therefore commenced on 1 December 2001 and will end on 30 November 2002, a period of 365 days.

Mike's income year ends on 30 June of each year. As the thing to be done under the agreement (the provision of premises by the lessor) is not wholly done within the expenditure year the prepayment rules will apply.

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